Demonetization- Modi's Political Masterstroke?

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On 8 November 2016, at 8:00 PM IST, Prime Minister Narendra Modi announced that four hours from his declaration, all 500 and 1000 rupees notes would be devalued. At the stroke of the midnight hour, India awoke to an unexpected tryst with demonetization. An incisive and insightful take on the issue, Pankaj Sharma and Saurav Sanyal's book gives agency to the ordinary Indian voters, the 'torchbearers of democracy'. Going beyond the idea of the citizen as a mere recipient of the government's edicts or munificence, the authors focus on the power of the common man as a voter and the repercussions of demonetization on the upcoming 2019 general elections in India. In 2019, will demonetization be seen as the waterloo of Modi, or will he emerge stronger and even more powerful? In dissecting the political implications of demonetization, the authors espouse a varied yet nuanced approach. From discussing the role of human psychology in making political choices to a search for an on-the-ground sentiment in determining the factors of influence, Sharma and Sanyal leave no stone unturned in analysing demonetization as THE political issue for the future of Indian democracy.

Pankaj Sharma is an engineer (IIT Kharagpur, 1999) and MBA (FMS Delhi, 2003) with 15+ years of diverse work experience in various leadership roles with global investment banks, Indian equity brokerages, State Owned Enterprises and startups.

Most recently, he was heading the Institutional Equities business for Equirus Securities. He was also leading the Equirus market strategy and macroeconomics team with an eye on political developments to make sense of how the unfolding events would influence the political line-up in the country and their impact on equity markets. Prior to that, he was an Equity Analyst and tracked Power Utilities, Capital Goods and Coal for UBS India for more than seven years. In this role, he was ranked 'No 1 Utilities Analyst' in Asia Money and 'Runner Up' in Institutional investor Polls. He has also received Thomson Reuters' Starmine Analyst Award for Best Earning Estimates' and 'Best Stock Picker'.

He also spent approximately one year with Citi and about three years with JP Morgan. Pankaj has also been involved with fund raising for startups and worked as an entrepreneur. Pankaj has also been a regular contributor for various print and electronic media outlets.

Saurav Sanyal has successfully donned many hats in an illustrious career so far. He has been a Researcher, Sales and Marketing Professional and Organisation Builder. He is a seasoned professional (MBA from FMS Delhi, 2003 Full Time Program) and researcher (MSc at IIT Madras 1998) with a flair for keen observation and a sharp academic bent of mind. He has over 16+ years of experience in leadership, as well as individual roles with Global Multinationals such as Unilever India, RB group, and currently

heads the business development for Elsevier Health in India. Elsevier is an RELX Group Company, the world leader in Information Solutions in the technology, health, legal and scientific domain.

In his current role in the RELX Group, Saurav has spent almost eight successful years across two verticals and also had the experience of developing and nurturing a high performing team. He works seamlessly for his clients across Government and Healthcare organizations that are always at the cutting edge of research and new technology, pushing the frontiers of knowledge. His meritorious work has been recognised through MD Awards at the APAC level (2010, 2011, 2014 and 2015) and Global Level (2012) within the RELX Group.

Previously, Saurav has worked in various Sales Leadership Capacities in India RB Group (earlier Reckitt Benckiser Plc). There he championed Distribution projects in Rural and Urban networks of Bihar, spearheaded the organisation's Key Account Management Practice in South India and executed several high value B2B Trade marketing campaigns for the India Organization of Reckitt Benckiser during 2003-2009. His achievements from his tenure at RB Group include the MD's Awards (2004) and launch of Top global FMCG brands across the Modern Retail in South India Market. During his years at Unilever, Saurav worked in Chemical Engineering and Materials Science Division, and received Process Equipment and Technology Innovation Awards.

From the evening of 8 November 2016, after the Government of India announced that the Rs 1000 and Rs 500 notes would cease to be legal tender in the next four hours, Demonetisation' or the Note ban has been continuously in the news. The government has maintained that in the short term, demonetisation is bound to create some inconvenience for the people. However, it will also lead to the creation of a much cleaner economy in the medium to long run. The common people of India have shown exemplary discipline, event though it seems that the entire demonetisation exercise was neither well thought out, nor a meticulously planned exercise. The causes for which are shortage of required infrastructure, manpower for implementation and resources.

In terms of political reaction, while it was natural for the ministers and Government machinery to declare this as an extremely courageous and visionary move, the Opposition was left baffled for a while and without a proper response. Once the initial shock had subsided, the Chief Minister of Bengal, Ms Mamata Banerjee of the Trinamool Congress, and the Chief Minister of Delhi, Shri Arvind Kejriwal' of the Aam Admi Party, seized the initiative and started attacking the Government. The Congress party, led by Shri Rahul Gandhi, was a late joiner, but has remained more vocal on this issue.

Among the more informed and aware class, the sentiment is divided. For instance, there are people who think that a) demonetisation may have led to some inconvenience in the short term, but this would be a good thing in the long term; b) there is no dearth of people who have now turned skeptical about the real benefits of demonetisation; and c) there are some people who have not liked this idea, which is primarily because of vested interests.

Bill Gates' has said "We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten." In our view, it is extremely difficult to forecast what happens in the long term and though it is possible that demonetisation may prove to be an effective and beneficial step over the medium to long term horizon, the near term impact from demonetization has mostly been negative.

Chances are that demonetisation as a tool to tackle Black Money is not going to be effective, as illicit wealth is rarely stored in the form of currency. Post demonetisation, there has been a negative impact on consumption and discretionary spending and though estimates may vary, it is likely that the GDP growth will be lower in FY17 and FY18 as compared to FY16. However, at this stage, it is really difficult to say with certainty whether demonetisation would have a good or bad impact, or none at all, on the Indian Economy over medium to long term.

Simultaneously, it must be noted that we do not think that any patriotic and honest citizen of the country would disagree that Black Money' issue needs to be addressed at the highest echelons of power. We must clarify that it cannot be outlined with certainty whether demonetisation was the best possible measure to tackle this problem, or if the benefits of this measure will be accrued over the long term. However, that is not the subject of this book. We do touch upon the less than optimal effectiveness of demonetisation in tackling Black Money, and how it has had a negative impact on the economy so far. Our focus in this book will be on the political implications of demonetisation.

Book's Contents and Sample Pages